The purpose of the EKTAN is to provide intellectual food for thought on business strategy, technology, and current events, primarily in the wireless area. I am also available for more in depth consulting assignment in the telecom space. I'm currently consulting on projects and subjects that include: iDEN and CDMA technology, Nextel International, Sprint Nextel (without revealing any non-public or proprietary information), Alcatel-Lucent, and Motorola, and wireless industry dynamics, metrics and trends.

Important Info

CREATIVE COMMONS NOTICE ________________________
Redistribution or reuse of this document, or any part of it, is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike License. To view a copy of this license, visit http://creativecommons.org/licenses/by-nc-sa/3.0/ or send a letter to Creative Commons, 559 Nathan Abbott Way, Stanford, California 94305, USA. Attribution must include the following three lines:
Copyright 2008 by Ed Ketchoyian
Some Rights Reserved under Creative Commons License
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Privacy Policy
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Privacy Policy:
Any personal information that I have about you, including your name, email addresses, contact info, will remain private. Period. An exception to this policy is if you explicitly authorize publication of your name and / or content in the EKTAN or the EKTAN Blog.
________________________

NY Mets Facts or Trivia

George Herbert Walker, Jr., an uncle of President George W. Bush, was vice president and treasurer of the Mets from their founding through 1977.
-------
Answer to question below: Sid Fernandez.
What 16-game winner was relegated to bullpen duty by Manager Davey Johnson during the 1986 World Series?

Wireless Industry

August 11, 2008

Yes, it's self serving and I've been away and busy for the past couple months, but I wanted to share that last week I was invited into the GLG Leader Program, based on my work with Gerson Lehrman Group Clients. Only Council Members who achieve a CouncilRank™ in the top 5% of the GLG global network are eligible to join this elite program. I'll try to have the GLG widget on the side of the blog updated soon.

There's a lot happening in telecom these days, especially with Sprint Nextel. I'll try to get some thoughts up there in the coming week. It looks to me like it might be possible for some imminent news forthcoming regarding the iDEN network.

June 04, 2008

The last newsletter was published on May 13, 2008. This issue
contains three articles, two of which have been reprinted at seekingalpha.com. My author
biography and an index of articles is at: http://seekingalpha.com/author/ed-ketchoyian.
These articles are practically identical to the articles here at the
EKTAN, but
at Seeking Alpha, as usual, there are interesting comments, and in one
case, a correction to a mistake in one of my articles. More on that
below.

There are a few things happening here at the EKTAN: First, I've made
mistakes in two recent articles. Corrections have been issued, but the
mistakes were embarrassing nevertheless. Earning a positive reputation
stems from accuracy as much as providing insight. On that score, I've
fallen short recently. I do have a growing appreciation for those who
do this for a living, i.e., real journalists and analysts, including
the folks over at RCRNews,
rather than hacks like myself. Second, I've been notified that the RSS
feed on the EKTAN blog is broken. I'm researching the issue and have
opened a trouble ticket with Typepad to resolve the problem. Third,
the EKTAN will be going on partial hiatus for about the next two
months, due to a new venture I'm starting (unrelated to the wireless
space) and a special assignment that I anticipate may soak up any other
remaining time starting some time in July. For those for whom I have
consulted and / or who may wish to consult in the future, I will still
make myself available and will respond in a timely manner, but my
availability for the rest of June will outside of regular business
hours. The largest impact of the hiatus will be that my contributions
to the EKTAN and the other sites where I feed my analysis will be
reduced.

Please check sonicblues.typepad.com every now and then or subscribe to
the
RSS feed (hopefully to be repaired soon) to get freshest material.

May 31, 2008

Correction (June 4, 2008): In the analysis below, the first claim in the "selected
Pros" section is wrong. In taking notes on the Sprint 1Q08 earnings
call, I mistakenly heard CEO Dan Hesse say that an iDEN / WiMAX
Blackberry device would be delivered this year. In reality, Hesse said
am iDEN / WiFi Blackberry device would be delivered later this
year. This mistake was pointed out in a comment by "idenguy" on
Seeking Alpha. I do not know who "idenguy" is, but I thank him for the
correction. The implications of my mistake on my analysis is that,
while iDEN might indeed prove to be a logical underpinning voice play
for Clearwire in a bundled spin from Sprint, the product or handset
foundation supporting such a scenario remains to be built. I still
believe that a long term future of iDEN under Sprint ownership will be
hard to justify, given the inability of iDEN technology to evolve to
any form of broadband.

Sprint's current state of the business and challenges combined with externalities will determine the fate of Sprint over the next twelve months.

Analysis

It's been a few weeks since Sprint Nextel's 1Q08 earnings call and there seems to be a lull in any dramatic or negative news announcements. Sprint's debt has been rated junk, but that news was expected. So, without recapping all recent events (e.g., Clearwire venture), now might be a good time to take a breath and list some pros, cons, and facts that might provide some insights to the future.

First, some selected Pros:

WiMAX / iDEN Blackberry device to be delivered later this year: If there were doubts iDEN were to live, the announcement of this device, along with increased media spending for the iDEN network, and CEO Dan Hesse's 1Q statements supporting iDEN, add more to the credibility that: a) iDEN will not be shut down, b) iDEN customers will have a broadband solution, c) the unspoken strategy of having a forced migration of iDEN subscribers to CDMA is less likely, d) a spin of the Nextel / iDEN network to the Clearwire venture is more plausible with a dual mode WiMAX device on the roadmap.

Management: Although additional changes should have been made at the senior level and below, not to mention at least one more person at the board level, overall, there are positive changes afoot.

Now for some selected Cons:

and 2. Churn and Customer Satisfaction: Both remain persistently poor, especially customer sat. Despite Sprint's claims of improvement in customer sat during the quarter, at least one index places Sprint substantially below the competition. Although so many factors influence churn, such as network reliability, RF coverage, features, handsets, apps, etc., the customer experience with care and at the retail level is one where Sprint appears to continue to disappoint in a big way. The customer experience is the single biggest hurdle to overcome in Sprint's turnaround and is the primary reason for continued poor churn and net add performance, despite having finally gotten a handle on network and billing issues.

Now for some selected factoids (mostly from the earnings call):

iDEN has 3 million public safety customers, as of 1Q08

iDEN postpaid subscribers are 12.3 million, 15.7 million including Boost pre-paid, with an additional 1.6 million Power Source subs (these are dual mode iDEN PTT / CDMA voice and data phones). The iDEN network would appear to have quite a ways to go before it gets below the 10 million sub mark.

Based in part on the above, some linear logic, prognostications and bold predictions:

As stated above, the foundation continues to be built to support a potential iDEN spin to the Clearwire WiMAX entity.

It will take several more months for Sprint customer sat and churn to stabilize, perhaps 4Q08. If there's no improvement by then, expect continued deteriorating performance and, if no spin off of iDEN, cash problems.

Wide commercial rollout of Qchat and interoperability with the iDEN base starts late 4Q08.

A Nextel spin (or semi-spin into a JV, similar to the Clearwire structure), if it happens, will be late 4Q08 / 1Q09. If the iDEN subscriber base and overall customer sat has stabilized, then Sprint will be in a relative position of strength. If not, then an iDEN spin will be a distress sale. The timing of late '08 / early '09 also presumes that by that time, D Block rule making concludes and settles. There will probably be no iDEN spin to support any public safety purpose until at least the D Block rules are finalized or the block is re-auctioned. Any potential suitor interested in iDEN for public safety that might in any way be related to Cyren Call would be would never jeopardize or complicate the D Block license process with a premature bid for Nextel, unless blessed by the FCC.

ConclusionSprint has some positive underlying strengths, but the road to recovery will be long and take many more months. The moment when a number of factors that will determine Sprint's future structure will come together nine to twelve months from now, as Sprint's ability to function acceptably with the most basic level of customer care as a wireless provider will reach its moment of truth. Externalities comprised of suitors that will finally be ready to make a move for either piece parts or the whole of Sprint will drive this ongoing Sprint saga to resolution.

One would have also thought that, as an affiliate, iPCS could have offered or negotiated a WiMAX reselling agreement with Sprint. Afterall, isn't WiMAX competing with Sprint's own CDMA data network as much as iPCS's? Or, did Sprint, in seeking a pre-emptive declaratory judgment regarding Clearwire holdings in one of iPCS's largest markets, Grand Rapids, essentially pick the scab of the healing wound to cause the relationship to again bleed? Finally, if iPCS is making a play to be acquired by Sprint, could they have picked a worse time to try to force Sprint's hand, given the financial, operational and strategic basket case that Sprint has become?

Any increased wireless infrastructure sales will be incremental in terms of technology evolution on existing networks or coverage. The demand for additional capacity on existing sites, including data, will depend on the how aggressive the carriers choose to promote innovative apps and associated pricing plans. The carriers have not proven adept in promoting novel apps to date, notwithstanding the greater percentage of ARPU that are comes from data. The open network movement embodied by Android, the Verizon initiative and others, is still a couple years from fruition. Video services and streaming will in part be supported separately by the likes of Qualcomm's MediaFlo and the whatever is rolled out on Dish Network's E band winnings. In addition, we should consider that the video streaming to mobile devices may not be the bandwidth hog as it is for landline, due to the smaller screens, until networks get to the point where many users are streaming.

As a result, it's reasonable to expect consolidation among vendors, especially, as has been suggested by other venerable analysts, pressure on a Nortel - Motorola marriage. Another possibility might be an Alcatel Lucent hookup with Motorola, but not only for the obvious reasons of the Lucent-side hooking up with Motorola. Many (perhaps too many) ears ago, Motorola was a base station partner with Alcatel on the switch side. Other possible acquisitors could be aspiring foreign vendors seeking entry into the U.S., such as Huawei, ZTE or an Indian player.

May 14, 2008

The last newsletter was published on March 28, 2008. This issue
contains three articles, two of which have been reprinted at seekingalpha.com. My author
biography and an index of articles is at: http://seekingalpha.com/author/ed-ketchoyian.
These are practically identical to the articles here at the EKTAN, but
at Seeking Alpha, as usual, there are interesting comments. It's
curiously satisfying to be called an idiot for stuff that you write.
It's also interesting when people add color to what you've written or
additional facets that validate your points.

There is a third article also in this issue written by the first guest
analyst to the EKTAN, Mr. Martyn Roetter, Ph.D. I met Martyn through
his writing on the Gerson Lehrman Group web site and have become a big
fan of his writing and analysis on the wireless industry and technology
issues in general. Martyn approaches issues from a detailed and many
times historical perspective, which I appreciate. He has staked out
what I would characterize as a reasoned, but skeptical position
regarding WiMAX. With Martyn's permission, I am republishing a recent
article that he wrote on the private GLG web site. A brief bio for
Martyn is at the end of the article.

Sprint Nextel of course had its 1Q earnings call and annual shareholder
meeting this week. Some striking stats for me were the following:
ARPU of $56; iDEN ARPU less than $56; CDMA ARPU greater than $56. Back
in the day, iDEN ARPU was the leader of the industry, but those days
are obviously long gone. CDMA ARPU popped up by $14 data ARPU. If my
math is correct, total iDEN subs, post-paid, pre-paid (Boost), and
Power Source is about 17.3M. That's a lot higher than I thought it
would be. Without Power Source, iDEN subs are at 15.7M. I think
predictions of iDEN subs going to below 10M are still a little ways out
into the future. Senior team largely in place. For some reason, it
was important to mention that Sprint has $4.8B in cash and marketable
securities.

Subjects still on the plate for future articles are, besides the popular Sprint Nextel Watch series:
LTE deployment issues, 700 MHz post-auction analysis - part 2,
Motorola, and a suggested topic called Near Field Communications.

Please check sonicblues.typepad.com every now and then or subscribe to the
RSS feed to get freshest material.

Sprint Nextel's market capitalization has surged about $9B to over $26B or by more than 50% over past three weeks as of the end of trading, May 6, 2008, most recently based on speculation that big changes are in the offing. The market and investors seem to be waking up to the idea that the piece parts of Sprint really do add up to more than the whole.

Analysis

How a DT Bid Might Work

If Deutsche Telecom (DT) makes a bid for Sprint Nextel, as has been reported widely, it will be in large part motivated as a value play. DT will be betting that, in a worst case scenario, that is, one in which integration of all the different network technologies fails, the remaining assets (spectrum, cash flows from leftover subscribers, facilities, etc.) will be worth the strategic goals of enhancing international expansion, especially in the U.S., to better compete with Vodaphone. If a DT deal for Sprint were to happen today, DT will likely sell off either iDEN or CDMA and WiMAX, in order to: 1) finance the deal itself, and 2) Eliminate redundant networks. WiMAX is not on the GSM evolution path and the Sprint version operates at 2.5 GHz, which would not be easily compatible with T-Mobile's AWS auction winnings at 700 MHz and where T-Mobile announced last week that they would be deploying their own 3G services, staying on the LTE evolution path.

Nextel iDEN Network Is Once Again The Intriguing AssetAlthough some might assume that the CDMA network might be the bigger prize, from a T-Mobile point of view, integration of the iDEN network might be easier: 1) iDEN uses a GSM core network that would be compatible with that of T-Mobile (wireless prepaid services based on GSM Intelligent Networks standards, for instance, might be integrated easier with iDEN), 2) From an RF point of view, at 800 / 900 MHz, the iDEN network might enable easier development of dual mode devices with the T-Mobile 700 MHz spectrum vis-a-vis the 1.9 GHZ PCS CDMA network, 3) iDEN's primarily business customer base might be more complementary to T-Mobile's low cost consumer base, offering a diversification opportunity (the same rationale could have been made three years ago at the time Nextel merged with Sprint). Lastly, T-Mobile's industry leading customer care practices and methods could accelerate the improvement of Sprint's major weak spot across any and all networks. On the other hand, Sprint's CDMA consumer-oriented brand and network might strengthen T-Mobile's position in that segment. That said, the following should be read in neon flashing boldface: An integration of CDMA and GSM networks has never been successfully achieved.

The bottom line here is that at DT move on Sprint could make sense if we don't get hung up on integration of up to five networks (GSM, iDEN, CDMA, WiMAX and GSM 3G) and focus instead on selling off redundant piece parts to avoid some integration issues, strategic fit, and the value play (although the value part appears to be diminishing as Sprint's stock price continues to spike).

Nextel Going Home?
So, what can be made of the other news that Morgan O'Brien et al may be making a move on iDEN assets, as I've pointed out as a possibility along with other scenarios here, here, and here? Without any inside information, but knowing only the interest and passion (and, no doubt, a degree of self-interest) that Morgan O'Brien has in pursuing public safety solutions, in addition to the intimate knowledge and pride he must have in having built the foundation for the Nextel network, the disclosure of such an interest in using the iDEN network as a first responder network should not be surprising. As I've blogged on before, Undoing the Merger is doable.

How Do WiMAX Delays Figure in the Big Picture?Waiting for Sprint to finalize a deal that might spin off WiMAX is like watching a very drawn out Act 2, Scene 2 of Romeo and Juliet, with Juliet (Clearwire and its partners) calling out to Romeo (Sprint) to help take WiMAX away ("Deny thy father and refuse thy name;Or, if thou wilt not, be but sworn my love). That said, the delays reported in the availability of the WiMAX network probably don't matter in the big picture of a Sprint breakup. There will be value in WiMAX to Clearwire and the Cable guys, regardless of the outcome of a Nextel spin or DT takeover. Either way, Xohm can be used to raise cash to finance a deal by an acquirer or by Sprint itself to make itself more attractive to a suitor; Sprint would be one more degree less complicated and therefore, easier to value.

What Happens If All The Deals Don't Materialize?

The good news is that, if all the vultures lose interest in the Sprint carcass, CEO Dan Hesse appears to have an excellent grasp in evaluating and assessing his leadership team. Without getting specific, there are early signs that some of the leadership that has embodied the worst of the negative culture on the Overland Park campus has been or is being identified. There are also anecdotal blips indicating that customer care may be improving.

With all the drama swirling around Sprint these days that would impress a producer of a Mexican telenovela, and with the unsolicited help and advice being offered to Sprint, I believe that Dan Hesse is quietly and efficiently going about his business. If all the deals fall through, I believe Hesse has the talent to pull off a turnaround.

Conclusion

With Sprint being in play, there are only further upside possibilities from either a takeover, split up or operational perspective. I believe if one more new suitor checks in and registers interest in Sprint or a piece part, all the talk and rumor will turn into hot action very quickly. Perhaps after the earnings call on May, 12, 2008, we'll see more action.

***Correction***

A key aspect of my analysis contained a glaring factual error, which
I should have known. Specifically, that T-Mobile's AWS spectrum won in
2006 and on which it was announced that they would be rolling out 3G /
W-CDMA service, is paired spectrum at 1.7 GHz (uplink) and 2.1 GHz
(downlink), rather than at 700 MHz as is stated in my article. After
thinking through the implications of the actual location of T-Mobile's
AWS spectrum, I've concluded the following: 1) The AWS spectrum still
would not lend itself to be easily compatible or, at least, optimized,
with Sprint's 2.5 GHz WiMAX spectrum because, while closer to 2.5 GHz
than 700 MHz, the AWS spectrum was allocated by the FCC as frequency
division duplex (FDD) rather than WiMAX's time division duplex (TDD)
design; 2) Reason "2)" under the heading "Nextel iDEN Network Is Once
Again The Intriguing Asset", starting with "From an RF point of
view...", is no longer valid; and, 3) Despite the fact that T-Mobile
AWS FDD spectrum is close to the Sprint PCS CDMA FDD spectrum at
1.9GHz, I still maintain that Sprint's CDMA network could ironically
end up being the orphaned child for the following reason: Action on
whether or not Sprint will be taken over or broken up will happen
within the next year. An LTE rollout /swapout for a hypothetically
combined T-Mobile W-CDMA / AWS spectrum network and Sprint CDMA / PCS
spectrum network, is just too far into the future (at least 4 - 5
years) to impact a current decision by DT on whether or not to keep
CDMA or iDEN in this scenario.

April 30, 2008

I'd like to introduce the first guest analyst to the EKTAN, Mr. Martyn Roetter, Ph.D. I met Martyn through his writing on the Gerson Lehrman Group web site and have become a big fan of his writing and analysis on the wireless industry and technology issues in general. Martyn approaches issues from a detailed and many times historical perspective, which I appreciate. He has staked out what I would characterize as a reasoned, but skeptical position regarding WiMAX. With Martyn's permission, I am republishing a recent article that he wrote on the private GLG web site. A brief bio for Martyn is at the end of the article.

Vodafone's series of
statements over time about LTE are unsurprising. They illustrate normal
and ongoing jockeying for negotiating position between and among
operators and equipment vendors, continuing uncertainties about the
demand for broadband wireless data capacity, and significant
differences between market dynamics, installed networks, and
competitive environments across the world, including among the various
properties of Vodafone itself.

Analysis:

North AmericaThe question for each operator of which next generation mobile
broadband wireless technology to deploy - and in which markets and when - will
be an outcome affected by a combination of perceptions of market demand, the
actions of competitors, the status and usage of its existing networks, the
availability and details of the offerings from vendors (network equipment and
mobile devices), the regulatory environment, its spectrum holdings, and of
course its financial situation.

Vodafone itself owns properties in markets with very different economic,
regulatory, and competitive situations. As a 3GPP operator it can follow an
upgrade path to HSPA+ which may in some markets delay the need for it to move
to LTE or any other 4G network technology, which necessarily involves a major
technological change, beyond the time when this shift becomes imperative in
other markets, or for competitors whose existing technology path may run out of
steam earlier. It should be noted that these decisions on timing depend as much
if not more on (as they should) the behavior and activities of customers and
services providers, and hence how rapidly capacity demands grow, as they do
upon the hopes and persuasive power of vendors to sell new technologies. It is
ironic that perhaps the first major deployments of LTE may occur among CDMA2000
(e.g. Verizon Wireless, Telus, and Bell Mobility in North America)
rather than among 3GPP (the GSM camp) operators if the former conclude that the
CDMA2000 upgrade path will come to a commercial dead end before HSPA does.

Allocations and assignments of spectrum will also be important for operators'
ability to introduce new network technologies. On the WiMax front there
is some movement to give mobile WiMax a chance to establish itself as a viable
technology stream prior to the anticipated emergence of LTE. For example Ofcom in the U.K. is
trying to give mobile WiMax a chance to become established against existing GSM
competitors by auctioning 2.6 GHz frequencies for mobile use later this year in
the context of a technology-neutral policy.

India is
another country in which the 2.5 GHz band may provide opportunities for mobile
WiMax to prove its worth in significant deployments, if for example the WiMax
initiative of the state-owned BSNL is fruitful in exploiting this spectrum
before other spectrum for 3G services is made available. It is nevertheless
unfortunate that WiMax advocates continue to present misleading statements
about the significance of the availability of today’s WiMax systems as a
time-to-market advantage over the later but considerably more powerful LTE,
ignoring the question of when standards for WiMax systems that can match the
performance targets of LTE will be finalized. In contrast current WiMax systems
are not different in performance in most cases (and may be somewhat superior or
inferior in others) to already widely deployed alternative technologies.
Investors assessing the relative commercial prospects for competing wireless
technology ecosystems do need to keep the laws of physics in mind as well as
business and financial considerations.

Martyn Roetter, is a
Principal at MFRConsulting, an independent consultant in the Telecom,
Information, Media, Electronics (TIME) sector, and a specialist in
global business strategy. Previously he was Vice President at Arthur D.
Little, in charge of its North American TIME practice, and Vice
President at Decision Resources, Inc., managing consulting and advisory
publications services for TIME industries. He also worked at PA
Consulting in the UK and US. He has over 25 years of experience in
advising on business strategy and technology-related issues for
vendors, service providers, financial investors, and regulators and
public policy makers. He has worked on projects in the Americas,
Europe, the Middle East, and Asia. He served as Chairman of the
Compensation Committee of the Board of Allen Telecom until its
acquisition by Andrew Corp. Current foci include Broadband wireless and
New Generation Networks, Web 2.0 techniques, mobile terminals,
regulation, and industry restructuring.

SummaryVerizon was the most successful in the 700 MHz auctions by utilizing a
multi-pronged strategy to secure a superior spectrum position for the
foreseeable future and positioning themselves to be in a position to
control their own destiny regarding the industry trend towards open
networks.

Analysis

While AT&T completed its objectives in the recently concluded 700
MHz auctions in filling out its spectrum holes, Verizon deserves kudos
for the shrewdest, most comprehensive and successful auction strategy.

1. C Block Wins: Recognizing that they lost the political battle for the open access provision for the C block to Google, Verizon won the entire C block that covered land in the continental U.S. for nationwide coverage, so that it controls how quickly it and and the wireless industry will evolve to open networks. Verizon can slow roll or fast roll, depending on whatever strategy they choose, their financial means, or competitive threats. Either way, to use a poker analogy, they have the high hand around the table, it's their bet and their fate is in their own hands regarding open access.

2. A and B block wins: For capacity augmentation for the following highest density cities / regions: Chicago, Los Angeles, Florida, Texas, and the DC through Connecticut corridor.

3. Make the Competition Pay: Lastly, as noted at Wireless Strategy, "One last tidbit: It was interesting to find that a whopping 73% of
AT&T's winning bids in the B block were placed in Rounds 26 and 27.
This is significant because Verizon placed their last bids on A and B
licenses in Round 26 in order to start their acquisition of the C block
in Round 27, so it's quite clear that Verizon's strategy was a
significant contributor to the high cost of AT&T's winnings." Indeed, per this RCR Article, "The average price per megahertz/potential
customer covered for the entire C Block was $0.76 [which Verizon dominated]. The B Block’s
average price per MHz/pop was $2.68, according to Optimal Markets Inc.
According to Verizon Wireless, the carrier paid $1.03 per MHz/pop,
compared with the auction average of $1.20."

April 28, 2008

The last newsletter was published on March 28, 2008. This issue
contains four articles, one of which has been reprinted at seekingalpha.com. My author
biography and an index of articles is at: http://seekingalpha.com/author/ed-ketchoyian.
These are practically identical to the articles here at the EKTAN, but
at Seeking Alpha, there have been some very interesting comments. In the last month, my article on Dan Hesse was included in Wikinvest.

Although I didn't go to CTIA, I've spoken to a number of colleagues
who did. The impression I get from my limited and biased sample is
that the show this year was high on professional networking
opportunities, but that the wireless industry is lacking a focus on the
next big thing. Notwithstanding the buzz on the ongoing WiMAX vs. LTE
religious war, if you are an old school wireless pro from years past,
you'd be looking for major announcements that involved spectrum, major
infrastructure equipment deals that resulted in commitments of billions
of dollars for new or upgraded technology, a blockbuster partnership
deal deal, or maybe even an iPhone-type device announcement (iPhone
derivatives, such as an iPhone "killer" don't count). None of which
happened, leaving some of the colleagues questioning their own future
in the industry.

Sprint Nextel continues to look for partners to share the cost of the
WiMAX rollout, which will undoubtedly cost several billion dollars, but
still has no takers. Given the credit markets being what they are and,
for intents and purposes, a recession in place, major deals that might
have been possible six months ago, seem like longer shots now. The
prospect of Sprint spinning off WiMAX completely to Clearwire or iDEN
or being taken over outright, given the intrinsic value of Sprint's
spectrum holdings alone, may not happen now in the short term, due to
macroeconomic conditions. This situation may end up being a blessing
in disguise for CEO Dan Hesse and any Sprint Nextel partisans who wish
for the company to remain independent; new management gets some
breathing room to turn around the company. Short of transplanting
headquarters from Kansas to a location where leadership actually has to
care about employee satisfaction because there is a market alternative
for good talent (rather than knowing that the best alternative is
working for H&R Block, Hallmark Cards, Applebees, McDonald's or
back to the farm, which has fostered a culture based on fear for one's
job security and having the right political connections over
self-initiative), or a wholesale change of entrenched management, it's
hard to envision a near term solution to the Sprint malaise with the
current lineup. I continue to be a fan of Dan Hesse and believe he is
capable, but turning around Sprint is more than a one or two person
job. If Dan Hesse is successful in turning around Sprint Nextel, then
he deserves to be enshrined with Lou Gerstner and Lee Iacocca in the annals of against-the-odds business turnarounds.

As for the rest of the industry, the big impacts for the future should
be, if I'm a vendor, equipment awards from winners of 700 MHz
spectrum. However, since the rollout requirements the 700 MHz spectrum
are so liberal, i.e., stretched out over several years starting next
year when the television broadcasters cease using the spectrum, any
major equipment awards and deployments are still well over a year out
and will be stretched for three to four years after that. Compared to
motivated initial deployments of other networks and technologies in
wireless industry past that took between eighteen months to three years
from the time of spectrum being awarded, I'd be concerned to be a
wireless equipment vendor to U.S. carriers from a revenue perspective
for the next few years.

So, where's the money? Will there ever again be a need for the same
level of wireless technical field installation nomads, living on the
road for almost a year at a time, doing construction work to build
greenfield wireless networks when establishing coverage in newly won
spectrum was like staking settling land on a new frontier, or will
these people be recorded in history in a documentary style that recalls
the men who built landmarks like the Golden Gate Bridge, i.e., who
existed in a bygone era in the day when making $5 a day was considered
good pay? Being in the field building wireless networks wasn't
glamorous work and I wasn't one of them, but I know a lot of people who
nevertheless reminisce fondly on those times.

There's a lot of buzz out there on mobile social networking,
location services, mobile video, next generation bandwidth, quadruple
plays, ATC, mobile search, mobile advertising, open networks / Android,
wireless internet, etc. These options are so far, for the most part,
unrealized promises or "futures". Whatever the "it" ends up being, I
believe it will be something unique to wireless, rather than an
adaptation or migration of an existing service or capability from
another medium. "It" will also be something that has unique utility to
consumers that will primarily be useful to them when in a mobile state
and has limited value if it is substituted by a fixed version. "It"
will also be something that marketers will be anticipate, but that
which consumers will decide where the value resides. My vote for "it"
according to this criteria is for navigation and location services.

My stated goal is to publish one article a week. It turns out that
I'm achieving that goal, but on an asymmetric basis, i.e., a burst of
four or so articles every three or four weeks. I'll work on my level
loading going forward. I also intend on republishing some guest
articles from analysts I believe product unique, quality and non-widely
available analysis. I'm continuing to mull on the following topics
for future articles, besides the popular Sprint Nextel Watch series:
LTE deployment issues, 700 MHz post-auction analysis,
Motorola, and a suggested topic called Near Field Communications.

You may have to
check the sonicblues.typepad.com every now and then or subscribe to the
RSS feed to get fresher material.

April 18, 2008

Based on the intrinsic value of its spectrum holdings and its business operations, Sprint is still a steal at its current market cap.

Analysis

A recent article by Ben McClure in response to my blog post suggesting circling sharks around a wounded and bleeding Sprint reasoned that at the current market cap of around $18B and $6 and change a share this stock is not a good investment for bottom fishers. Mr. McClure writes:

"At a share price of $6.76, the company has a market capitalization of about $18.8 billion. Let's assign to Sprint Nextel a forward PE ratio
of 16, about the same PE ratio attached to Verizon. Based on that
multiple, Sprint Nextel will have to produce about $1.2 billion net
income or an EPS of
41 cents per share in 2008 if share prices remain constant. Yet, Wall
Street earnings estimates say that this number is well beyond reach.
Analysts say the company is on track to produce just 8 cents per
share in 2008 according to Market Watch."

Clearly, by this reasoning, Sprint, at a PE ratio of 16 and earning of 8 cents a share would indicate a share price of around $1.25. The underlying argument is that there's still substantial downside risk to Sprint. If Sprint were to go as low as $1.25 a share, this would equal a market cap of $3.5B! I'm sure one could construct an argument for the share price going even lower by adjusting the PE ratio to, say, 12, to reflect that Sprint underperforms relative to its peers.

Another calculation, though, would set Sprint's value much higher, looking at the piece parts. A rough calculation valuing Sprint's spectrum holdings at $1 per MHz - pop for iDEN spectrum at 800 / 900 MHz, $.75 per MHz - pop for PCS spectrum at 1.9 GHz, and $.50 per MHz - pop for WiMAX spectrum at 2.5GHz, easily yields an intrinsic value of over $10B. By being even more conservative and downgrading the value of Sprint's spectrum holdings by 20% to $8B still leaves one to argue that, with current debt being factored in, the remaining bricks and mortar, equipment, iDEN, long distance and IP / wireline, CDMA and WiMAX businesses together are worth only $8 - $10B at the current stock price.

By my reckoning, the depressed stock price is in large part due to historically and entrenched (below the current CEO) decision making, leadership and management, manifested in customers so dissatisfied that they leave the network, despite network quality and reliability being good. On the iDEN side, dissatisfaction is compounded by ongoing uncertainty of iDEN in Sprint's long term architecture (iDEN has no evolution to broadband), despite well intentioned and genuine best efforts on the part of CEO Dan Hesse to reassure customers that iDEN will be around for the foreseeable future.

Sprint, in the eyes of investors and customers, at this point has approval ratings like the Bush Administration: They have screwed up in such an extreme manner for so long that the negative sentiment has become so deep-rooted that it's hard to see how any recovery is possible.

In the case of Sprint, though, it really is hard to see how conditions can get worse. Hesse has already prepped investors' expectations by forecasting a large subscriber loss for first and second quarter, 2008, as iDEN continues to bleed perhaps unprecedented subscribers in the wireless industry.

Sprint does not have timeto wait for Qchat to become operational over the next year. Sprint also doesn't have time to wait for the WiMAX build out to mature over the next three years. I believe that Hesse understands this situation.

The short term key is iDEN. The problems on the iDEN network are exacerbated when you realize that when subscribers churn off, they don't do it in one's or two's at a time, but in groups, due to the unique group call capability of push-to-talk that business customers love. An optimist would see though that group calling is still a differentiated technical capability that Sprint controls with iDEN and Qchat, and that, if Hesse is able to turn around iDEN, then the heavy churn can drop as dramatically as subscribers choose to stay in groups instead of leaving.

ConclusionWhen looking into the abyss, it's easy to imagine an infinite drop into the darkness. On the other hand, the drop may only be a few feet. I believe iDEN will stabilize before the end of 2008. When that happens, the emotion depressing Sprint's stock price will burn off and the price will bounce back. So, for now, if a suitor can put together the financing in the current credit environment, now is the time to acquire Sprint. I'm reaffirming my previous position that Sprint is a steal at its current market cap.

As I wrote previously, the longstanding feud between Sprint and iPCS had another chapter written on March 31, 2008, when an Illinois court ruled in favor of iPCS in its longstanding dispute with Sprint over iPCS claims of exclusivity violations resulting from the Sprint Nextel merger. With this dispute finally over and the new affiliate agreement iPCS signed recently with Sprint, perhaps both companies can focus more on the future and satisfying customers.

The lack of iDEN only handsets on the immediate horizon gives mixed
messages to investors and customers as to Sprint's commitment to the
iDEN network.

Analysis

It is troubling that Sprint Nextel announced a plethora of handsets at CTIA, but within these announcements, there were no new iDEN handsets. Sprint announced new iDEN models when support for iDEN was affirmed early in the first quarter of 2008. If Sprint were actively reviving iDEN and managing the technology, then couldn't we at least get a peek at the iDEN handset roadmap? The Samsung Instinct phone announced has a two month overhang until it's available in June. That implies that there's nothing in the pipleline for iDEN for the first half of 2008.

Conclusions

The lack of iDEN only handsets on the immediate horizon is puzzling and gives mixed messages to investors and customers as to Sprint's commitment to the iDEN network.

The lack of an announced Sprint multi-party deal at the CTIA show is not necessarily a sign that no deal will happen or that negotiations have failed.

Analysis

Speculation and the resulting disappointment on the part of wireless industry pundits and analysts from expectations of a big announcement regarding a blockbuster partnership between Sprint, Clearwire, Time Warner, Comcast, Intel, Google and possibly Brighthouse that did not materialize that this year's CTIA convention in Las Vegas was similar to the wishful thinking and attendant dismay of a child not getting candy in the checkout line. The "deal" may very well be in the works, and possibly imminent, but there was not much to read into the lack of an announcement at CTIA. To say that these deals, especially multi-party ones, are complicated, is an understatement. In fact, we should have been dubious of the deal if it was rushed just to make an arbitrary target CTIA announcement date. The rush would have made it a bad deal. The "final" deal, if and when it is announced, should be much more than term sheets; it should be detailed and signed-off and approved at board-level for all involved parties.

March 27, 2008

The last newsletter was published on March 15, 2008. This issue
contains two fresh articles and feedback information. In the past two
weeks, I've submitted for articles from the EKTAN to Seeking Alpha at seekingalpha.com. My author biography and an index of articles is at: http://seekingalpha.com/author/ed-ketchoyian.
These are practically identical to the articles here at the EKTAN, but
at Seeking Alpha, there have been some very interesting comments. One
article garnered 27 including one response from myself.

Unlike Jerry Springer's system of providing profound Final Thoughts at
the end of the show after there's been torn hair from who knows where
and whatever else dispersed through the studio, I'm providing these
thoughts at the beginning.

I have been asked if I'm going to CTIA this year. Unfortunately, no.
I'll be monitoring from afar. I have been to many CTIA and PCIA shows
over the years, including the PCIA show in 1998 in Orlando that was cut
short by an impending hurricane. In my opinion, that was the beginning
of the end of the PCIA show. There was already fatigue setting in with
having two major trade shows a year. CTIA and PCIA were in heavy
competition. The vendors were whining that it was very expensive to
support two shows per year. The hurricane provided a excuse to many at
the time to put their resources in the safer and larger CTIA show in
the Spring.

I believe the show this year will be the beginning of some major
industry announcements that will happen through the rest of 2008. With
the quiet period ending next week from the 700 MHz auction,
coincidentally coinciding with the CTIA show, we could have some
interesting announcements. By the way, am I imagining things or did
Verizon really win the A, B and C blocks for Chicago? There's a lot of
good analysis out there on the auction results, especially from Wireless Strategy
(no, they don't pay me to plug them, but I know them personally and I
know the quality of work they produce). I'll be working on providing
unique observations next week.

Some of the ideas and topics I'm mulling on for future articles, not
including the popular Sprint Nextel Watch series, include the
following: LTE deployment issues, 700 MHz post-auction analysis,
Motorola, and a suggested topic called Near Field Communications.

A lot of the feedback that you have given me has been positive and
encouraging and I very much appreciate it. As I have commented to a
few people in emails, I really love writing and analyzing. I mentioned
in the previous email version of the EKTAN that I was going to publish
one article a week. It seems like I'm working on that timetable, but
the email version will be going out every two weeks. You may have to
check the sonicblues.typepad.com every now and then or subscribe to the
RSS feed to get fresher material.

If you would like to subscribe to the email version of the EKTAN, which contains the same content as on this web site, please email me.

CEO Dan Hesse appears to be focused and decisive. He's bringing in trusted, new blood to the executive ranks. He still faces an uphill struggle. Investors, alienated employees and customers will need persistent and encouraging news to rebuild confidence in order for Sprint Nextel to stay in one piece long term. However, Hesse continues to earn positive marks for his leadership, regardless of the final outcome.

Analysis

It's easy to sit back and offer suggestions and criticism on a
particular company, especially if you don't have much skin in the game,
i.e., your primary livelihood isn't tied to the enterprise. Dan Hesse
continues to make decisive moves. After years of dysfunction throughout the executive ranks at Sprint Nextel, he deserves credit. It will still
be weeks and months before we know if real changes are starting to take
hold, and, indeed, more leadership of the kind we are seeing will be necessary for Sprint to stay whole and / or independent, if that is the goal. The level of discontent both
within and outside Sprint Nextel is unusual, even for a company in
distress. There are unconfirmed accusations by people who claim to be current or former employees of Enron-like fraud.

It's been a couple months since Hesse's
joined the company. He's had a chance to make initial assessments. At this point, it doesn't matter whether it was part of the grand plan coming in or something decided
after coming on board; Hesse has decided that he needs help. Elfman is part of Hesse's "army" having worked for him at Terabeam
and AT&T Wireless. Elfman is a trusted, competent and loyal
executive from Hesse's past.

There are three interesting parts to the announcement:

1. President Wholesale reporting to a President (Patterson to Elfman)

2. Chief Network Officer reporting to a President (Walker to Elfman)

3. Product Development and Tech Dev now reporting to Elfman

But for Marketing and Customer Care, Elfman is essentially a COO. Up to now and in the absence for several months of an official COO, Patterson and Walker reported to the CEO. It will be interesting to see in the future if and how these peer to peer reporting relationships are resolved. In addition, with Tech Dev reporting to Elfman, there is an open question as to where the CTO reports. Previously, the CTO reported to the Chief Strategy person that deposed CEO Forsee brought in.

ConclusionThe bottom once again is that Dan Hesse appears to be focused and decisive, and continues
to earn positive marks for his leadership, regardless of the final
outcome.

March 25, 2008

This week, the Sprint has a market cap that has bumped up to
around $18.5B. The bump happened immediately, almost to the hour, when
the 700 MHz spectrum auctions closed. I originally thought the bump
was due to imminent takeover activities. Today (being a little on the
slow side), my belief is that the stock price jump might only be
reflecting the final updated market value on Sprint's spectrum, which
would still be an input in calculating any breakup price for the
company.

Well, this has been a busy week. Not for adding analysis and content to the EKTAN, that's for sure. Rather, it's been interesting to track the two posts, my first "pillar" post of the EKTAN, "One Scenario for Sprint's Long Term Future" and the more recent "Undoing the Sprint Nextel Merger," from the EKTAN that I've made to Seeking Alpha.com. I've submitted a third article also that will probably hit the web site in the next day on the "How Low Can The Sprint Stock Go" post. In this post, I wanted to repeat a smattering of where these articles end up, once they get posted on analysis sites that get real traffic and some comments and feedback.

As of now, the "Undoing" article has received 27 comments on Seeking Alpha. There's been a very interesting debate, some of it logical. Same thing for the "One Scenario" article, which received 16 comments. All of these comments include those from a particular profane and emotional Sprint defender, who has had at least one offensive and vulgar comment deleted at my request.

The day that Undoing was posted on Seeking Alpha, Contributing Editor Gary Kim, of TMCnet.com, picked up on my piece, wrote an article on it, titled, "Could Nextel be Spun Off?" and referred to my post. Thank you, Gary.

If you go to Yahoo Finance and get a quote for Sprint, you will see the "Undoing" Seeking Alpha article in the blog section.

Also, on Yahoo message boards, someone pasted my "One Scenario" article there, to which a thoughtful poster commented the following (edited for space):

I'm sorry but Ed Ketchoyian needs to take off the rose colored glass
and put down the pipe. His basis and conclusions are all over the place
and just simply incorrect. Anyone with half a brain and that knows anything about the wireless industry can pick this "article" apart. SN will not spin off iDEN. SN will not spin off WiMax (they will gain outside investment). SN will not be bought by VZ, regardless of voice 4G path. Sometimes Seeking Alpha articles need to be taken with a huge dose of salt.

My pipe has been unused for several years.

The articles were also picked up by FinanceMart,CNBC.com, Wikio News, and a site that indexes blogs based on some key words. In this case, the word "abscess" was picked up and the "One Scenario" article was listed with a bunch of medical articles describing the different kinds of abscesses you can develop on your body.

There were some negative comments initially, but then I noticed some of the naysayers
were people who defend Sprint and put down other people who write about
the company in order to diminish their credibility. I've been on the
chat boards for many years, including the political ones, so I'm
familiar with this particular breed. It's funny, because there's also
the opposite side as well. All my article does is provide a canvas for
these ongoing battles to continue.

Anyway, those were the initial comments. There were more lengthy and thoughtful comments as well and these are the ones I recommend checking out.

The underlying intrinsic assets, such as Sprint's spectrum holdings, internet backbone and still positive cash flow from the dwindling post-paid customer base, may also lead one to the conclusion that, at this point, Sprint's breakup value might be higher than the whole. As an analogy, it might be instructive to think of Eddie Lampert's play for a depressed at the time Sears. Mr. Lampert was correctly able to understand where the intrinsic value was for Sears (in its underlying real estate holdings), where others focused too much on poor operations.

As mentioned in my previous Sprint Nextel Watch analysis, there may be more suitors than meet the eye, especially for the piece parts. A selected list of scenarios could be the following (not in priority order):

Clearwire / Craig McCaw / Intel / Google buys Sprint's WiMAX business and, potentially, the iDEN network. Rationale: VoIP on the WiMAX network might not be available in handset devices for a few more years. A WiMAX / iDEN dual mode device play would give a standalone WiMAX entity a differentiated voice offering until VoIP devices are available.

Public Safety Spectrum Trust (PSST): This group might be comprised of any combination of Morgan O'Brien, other ex-Nextel executives swimming around the Northern Virginia ecosystem, Tim Donahue, and private equity players. The aim would be to buy iDEN and use it as an interim public safety / first responder system. iDEN today does not fulfill the full feature requirements set for public safety, but, assuming the 700 MHz D-Block has no takers, then iDEN may be the next best short term alternative.

Alltel or Verizon: The scenario here is that either company (in the event Verizon does not win spectrum at 700MHz or Alltel in any case) purchases Sprint on the cheap and spins off iDEN and / or the WiMAX Xohm business to pay for the deal. Verizon can pass Justice Department and / FCC muster in the case of AT&T or Google winning the C-Block AND by divesting iDEN.

Mr. Carlos Slim: Buys Sprint, spins off iDEN. On the other hand, Nextel International (NIHD) is a scrappy, pain in the butt competitor to the larger Mexican carriers the way pre-merger Nextel used to be. A Slim purchase of Sprint and holding on to iDEN could have a dual purpose of cutting off NIHD in the home Mexican market AND gaining entree into the U.S. I read a comment that AT&T has 9% equity stake in Telmex, so I'm not sure how that information, if true, would play out or complicate a Slim investment.

T-Mobile: Not likely, for reasons you can read about elsewhere.

Lastly, there's speculation that Google might make a play for the spectrum.

ConclusionThe bottom line here is that there are lots of possibilities and scenarios for Sprint to be in play at its current market capitalization and stock price.

March 15, 2008

An iDEN spin would be complex, but it would still be achievable with competent people in charge, and not as difficult as projected, given the relative lack of integration between the iDEN and CDMA networks.

If you listen to the whole event, though, you get a different picture of the level of integration that has taken place between the iDEN and CDMA networks. On a cell site collocation basis, Ms. Walker indicated that, to date, only 10% of iDEN and CDMA cell sites had been collocated. Furthermore, she said that it turned out that the costs of collocating existing sites was much higher than anticipated, so, a significant percentage of those 10% of collocated sites were for new construction. This matter-of-fact response, if accurate, calls into question one of the major drivers for the justification for the original $12B savings claim that would result from the Sprint and Nextel merger, that is collocation savings. As such, if less than 10% of existing sites are currently collocated, then there has been public disclosure at least through this media conference of why the original projected cost savings were never realized.

Next, in response to another question on just what had been integrated between the two networks, Ms. Walker cited the following items: voice mail, messaging platforms, billing and field technical support. Generally, from a network element perspective, these are all generic, standard interface, technology independent platforms, and, with the exception of the billing platform, a relatively low proportion of total network value.

Since there have been limited cell site collocations, the opportunity to leverage backhaul over a single transport pipe also appears to have been limited. The big ticket network items, namely, switches, HLRs, base stations, BSCs, OMCs for each technology were disclosed to be operating separately.

So, besides the largely peripheral or secondary, standardized network elements just mentioned to be "merged," Sprint has at least managed after more than two years to have implemented a single physical Network Operations Center, or NOC.

A footnote on the merged field technical support staff: it was disclosed that, in large markets, the technical support people likely retained their specialization of either iDEN or CDMA technologies. Thus the cross-training of field staff has likely only occurred in secondary markets.

How hard would it be to split off iDEN in the case of a spin-off? Probably not as hard as the Washington Post article or Sprint indicates. The major tasks needed, in addition to recreating headquarters, sales, customer care and retail functions, would be: augmenting technical support, building a new NOC, planning for an HLR and billing system cutover, procuring ancillary network elements or reverting to existing ones, and, or course, negotiating procurement and support agreements with vendors and partners.

Conclusion

To be sure, an iDEN spin would be complex, but it would still be achievable with competent people in charge, and, from a hardware point of view, not as difficult as projected, given the relative lack of integration between the iDEN and CDMA networks.

Summary

Speculation on moves by selected players in the wireless area that are presumed to be interested in the C-Block when the 700 MHz auctions close. There is also speculation on implications of the likely outcome of the D-Block failing to reach the reserve price.

Analysis

With the bidding almost over and the only action left being in places like Hunterdon, NJ, where, presumably, some ex-AT&T or Verizon executives are undoubtedly trying to eke out a B-Block license so as to offer their secret dream of being a broadband access provider to their neighborhood, some big questions are: will Google end up with C-Block spectrum or, instead, will one of the incumbents, AT&T or Verizon, scoop up the band. As the people at Wireless Strategy point out, these remaining blocks in the B-Block appear to be undervalued on a MHz-pop basis.

There will be a number of large strategic moves in the industry in the three to six months after the auctions close, depending on who wins what. If Google or another non-incumbent is a big winner, as I mentioned in previous analysis, expect some big moves on the part of Verizon, AT&T or a foreign entity towards consolidation. If Verizon or AT&T is a big winner of the C-Block, then a different set of strategic options and moves kicks in with the some chess pieces being arranged differently. Instead of Sprint falling into the hands of a Verizon, perhaps Alltel becomes a suitor.

I believe a wild card might be the cable companies. They haven't been talked about much in the trade press, although they are mentioned in passing as another set of players to be considered. It's not clear how seriously they are being taken and how their aspirations align in the bigger picture. There's been a lot of talk about integrating mobile into the cable bundle, but there really hasn't been much on the execution side or in having a coherent overall strategy.

With the D-Block likely to be unclaimed, what are the options for the Public Safety Spectrum Trust (PSST) and the FCC? There are some interesting possibilities, but I would only like to point out the following: coincidentally, a number of the public safety entities are stacked with ex-Nextel executives who actually understand wireless business, technology, public safety, spectrum and the government. Although many of them are ex-colleagues, I have not had any public or private conversations with them on the future of the D-Block. That said, I would not be surprised if this band of brothers and sisters come together in some form in the future to again rock the industry in some manner that includes public safety.

The recent resolution of so many outstanding issues between Sprint Nextel and iPCS may be a small indication of yet another culture change at Sprint. From a Sprint perspective, the question on many investor's minds these
days is: are these changes too little too late to make a difference?

Analysis

When iPCS, the CDMA affiliate of Sprint Nextel, announced operational results last week, the big significance was the announcement that some of their court claims with Sprint Nextel were mutual withdrawn and new, lower cost per gross add user rates that Sprint Nextel charges affiliates to handle back office services were now in place.

The feud between iPCS and Sprint Nextel is personal and goes back many years, at least to 2003, when iPCS filed for bankruptcy. In distress, Sprint had the opportunity to help out its affiliate. Instead, Sprint refused to help its partner and, as iPCS charged, withheld roaming fees and reduced roaming rates. Of course Sprint was not obligated to help its partner. On the other hand, Sprint certainly had the option to not take advantage either. iPCS did the only thing any red-blooded American company could have done under they circumstances after being kicked while on the ground: they sued Sprint for breach. The relationship, of course, went further down from there as both companies played hard ball in every facet of the relationship.

Some people have suggested that the roaming partners enjoyed the good life, collecting high roaming fees with little financial and operational risk, given that much of the back office operations were outsourced. (If that were the case in this situation, though, how is it that iPCS filed for bankruptcy at all in 2003?) Alternatively, from a true partnership and integrity perspective, if a key business partner has problems, you might consider the relationship from a holistic view and not take any failure or minor crack as an opportunity to treat your partner as an enemy.

After the Sprint Nextel merger was announced, as other CDMA affiliates were bought out, little iPCS held out and sued again over alleged territory, marketing and branding breaches related to the Nextel iDEN network competing with the CDMA network. This time, though, it didn't turn out to be a ploy to get a higher takeover price. It appeared to be personal.

To be sure, iPCS is a small player, covering about 15M pops and having well under 1M subs. Its markets are in places like Grand Rapids, Davenport (IA), Scranton and along the Tennessee / Virginia border (i.e., bubba country).

Conclusion

So, although today one of the law suits in Illinois is still outstanding, the resolution of so many of these other issues between the two companies in favor of iPCS (note the CEO public comments of approval as well as the stock market's positive reaction) may be another small indication of a culture change at Sprint, which would be in the direction of treating partners with a win-win long term view. Either that or Sprint may have just decided that fighting iPCS's only substantial leverage point, the exclusivity breach claim, wasn't worth the legal fees and the risk of losing. From a Sprint perspective, the question on many investor's minds these days is: are these changes too little too late to make a difference?

March 14, 2008

Sorry there haven't been any posts in a couple weeks. I'm working on several entries and will have them posted in the next day or two. There will also be a new issue of the newsletter in the same timeframe.

February 27, 2008

Hesse deserves an 'A' for going public to shake up and embarrass
entrenched management and the legacy mindset with details of customer
care problems.

Analysis

I've tried come up with ideas for analysis so that I can wean myself from being a one-note analyst, since so much of my ongoing analysis is Sprint Nextel centric. However, there just seems to be so much new news every week that it's difficult to pull away to focus on other issues in the wireless industry. The latest revelation is this BusinessWeek article on Sprint's sad state of customer service. That Sprint has bad customer service itself is not a revelation. Indeed, the details are astounding. I believe what is more telling though is what the story tells us about the new leadership of Dan Hesse.

There has been a lot of excellent analysis and insightful recommendations posted by independent analysts on what Sprint Nextel needs to do to fix customer care. The BW article though paints such a dysfunctional picture.

Some thoughts and observations from recent personal experience and the article:

If there was a playbook for unintended consequences emanating from perverse incentives that completely countered the goal of excellent customer satisfaction, it is embodied in Sprint's customer care management practices. An example: requiring reps to have quotas for renewing contracts. From personal experience recently, I attempted to deactivate a Sprint Aircard. The card was on an internal business account and was still active. Employee phone care told me I had to go to a store to deactivate (presumably, because they were will on quota to renew contracts and couldn't be bothered with providing other care -- employee care and regular care are now managed by the same group). The store I went to politely told me that I needed to go to the Reston campus employee store to complete my transaction. On my third touch with customer care at the campus store this past Monday (by now the BW article was on the web and on newsstands) the rep, although not his responsibility, did pick up the phone and resolved my problem on the spot. I asked the rep if there had been any reaction to the BW article. In response, he pulled out a computer printout of the online version of the article and asked, "You mean this?!" All the reps, by the Monday after this article was published had been given the article.

CEO Dan Hesse was interviewed for the article and provided detail regarding his initial management reviews upon taking over a month ago. Clearly, Hesse wanted to send a message to his company that he understands his task and will do whatever it takes to shock employees, and especially his management, into positive change. In this case, he went public with this dirty laundry that would NEVER have been exposed under the old leadership and the Sprint legacy mindset.

ConclusionHesse deserves an 'A' for going public to shake up and embarrass entrenched management and the legacy mindset with details of customer care problems. Cooperating with BusinessWeek on this article was brilliant. Although the news itself is old, the leadership shown by Hesse is the first tangible sign since taking over that, while there's still much risk for Sprint, there may finally be a real captain on the ship.

In this article, it is proposed that Sprint has an opportunity to
think and act strategically to counteract the Verizon announcement of,
if not a price war, then an unlimited calling plan war, by promoting
the iDEN network aggressively and expanding Boost Unlimited on the CDMA network.

Analysis

Although there was much buzz in the market about Verizon's announcement
on its unlimited calling plan and what it means for the industry in
general, to date, Sprint Nextel, unlike its rivals, AT&T and
T-Mobile, has been silent in formulating a response. Sprint had been dabbling with a Boost
Unlimited plan in a few markets the past few months. There had been
speculation at that time that a Sprint, desperate to stop its exodus of
subscribers, might itself be contemplating starting, or at least
signaling intent to start, a costly price war. If that was the
message, and if Verizon was listening, the reaction has been a decisive one. Whoops, what do we do now, chief?

Verizon, I believe, chose a rational time to announce this unlimited
calling plan "war," if it was, in fact, targeted as an offensive move
against its wounded rival, Sprint. Indeed, Verizon, AT&T and
T-Mobile all reported outstanding net add performance for 4Q07.
AT&T and T-Mobile promptly joined Verizon with unlimited plans,
arguably to continue to provide an incentive for ongoing growth and, if
lucky, inflict pain onto Sprint either in the form of reduced margins
and / or a continued erosion of the subscriber base.

The following proposal might be unconventional, but I believe makes logical sense as Sprint's reaction:

Roll out an aggressive, perhaps $70 unlimited plan on the iDEN
network. Rationale: The iDEN network already has excess capacity from
subscribers having left for the past two years. As a result, there are
fewer subscribers generating revenue to cover the fixed, let alone
variable, costs of operating iDEN. Thus the incremental costs of
adding iDEN subscribers from a network capacity perspective is
negligible. Sprint can use iDEN as an offensive weapon to inflict pain
back at its rivals, stanch and potentially reverse the exodus of
subscribers, AND prove to a potential buyer of iDEN that, not only is
the network viable, but the iDEN asset has become more valuable with
more subscribers. iDEN can be used to spear back at Verizon and the
industry, since the incremental costs of doing so are so low.

Roll out the Boost Unlimited plan nationwide on the CDMA network that matches the Verizon plan as a defensive measure to keep CDMA subscribers at home where they belong, in Kansas.

From my post last week on an
idea for a social networking tool, I received a url from a trusted reader of the EKTAN to an article
titled, "'Friend
locator' could become next craze for social networkers",
which was
launched at the Mobile World Congress in Barcelona. The idea of a
location services overlay onto social networks, like Facebook, might be
a boom or bust, but no doubt, some of the location services highlighted
in Barcelona as mentioned by this Unstrung article, "Location: It's Creepy, But It's Here." Privacy issues are clearly an important consideration as the nascent Reese's combinationof
location and social networking takes off. In fact, there is a
significant and surprising body of research already done on how one
might social network anonymously through "Private Information
Retrieval" (PIR) algorithms, efforts by Trusted Computing, and others. Some researchers have devised creative techniques, such as that of MobiEyes of Georgia Tech, with concepts such as "Anonymization-based Location Privacy",
which contains, in the second half of the presentation, cool ideas such as
"spatial cloaking" and "temporal cloaking." Ok, nerds, you may now
return to your regularly scheduled programming.

This has been a busy week for Sprint Nextel and for the industry in
general with the (now old news) announcements of the renewed
hookup between Sprint Nextel, Clearwire and now Intel. I wanted to
comment on this development, but since it's been over a week since the
announcement, all I can say is that I think a potential alliance
between these players does nothing to abate the end-game scenario of a Xohm spin-off. I'm still mulling on the "who would buy iDEN
question," and have some thoughts below on what Sprint Nextel should do
in response to the price war, or at least, unlimited pricing plan war, initiated by Verizon.

Some of you also might be interested, if you didn't know already, how
the Google Maps function works on the iPhone in providing location
information. The genesis of my curiosity happened a few weeks ago,
when I was in New York City to network on behalf of HailCab. The local
inhouse "techie" at the law firm that was hosting us whipped out his iPhone
Google map and asked us if we had a demo that would work on his iPhone
since he already could track himself moving and was really jazzed up by
the functionality. We didn't have a demo (working on it), but it had
perplexed us since that day as to how iPhone was able to get what looked like an
offdeck location app to work.

I happened to be in an Apple store in
Bethesda this week and took the opportunity to ask the rep and his
answer was that the iPhone "sniffs" RF signals from Wi-Fi hotspots. The iPhone doesn't
actually register on these hotspots. Rather, it detects the various
signal strengths of all the WiFi networks that it detects and
essentially self-locates itself on the Google map. This is how it works
without having access to GPS information. Of course, there is a company
that has patented this method / technology. The rep didn't remember who
it was, but said they had been mentioned at MacWorld. I ended up
taking the lazy approach to verifying this claim and posted the
question on Linked-In and got a lot of good private and public
answers. Since I didn't announce to anyone that I might be posting
their responses on the EKTAN or the EKTAN blog, nor did I seek
permission to do so, I don't feel comfortable even posting anonymous
quotes. I will, however, paraphrase some of the good answers.
Essentially, the Apple rep's explanation was correct, using technology
from Skyhookwireless.
After triangulation is done (or X-angulation, depending on the number
of hotspots sniffed), the app maps your location against an existing
database of known locations of access points. Here is a blog entry
that explains it more.

February 14, 2008

SummarySay what you may about the Sprint Nextel ship and its prospects, but the appointment of Ralph Whitworth to the board announced Tuesday (February 12, 2008) on the surface should appear to be regarded as good news. If one of the key arguments explaining Sprint Nextel's woes lies with management incompetence and strategy, and this malaise has been in place since the merger, there's no better place to start than with the board, right? In other news, the inevitable consolidation of HQ to Kansas was announced yesterday (February 13, 2008). How can we interpret this consolidation in the context of the future of the iDEN network?

Analysis

Activist On Board:

Certainly, Sprint Nextel isn't the only example of bad corporate
governance at the board level, nor is it the worst, but the long, sad saga
of the company makes it one of the highest profile examples.

According to this source, the major duties of Board of Directors include:

"Major Duties of
Board of Directors

Brenda Hanlon, in In Boards We Trust, suggests
the following duties (as slightly modified by Carter McNamara
to be "nonprofit/for-profit neutral").

1. Provide continuity for the organization
2. Select and appoint a chief executive
3. Govern the organization by broad policies and objectives,
4. Acquire sufficient resources for the organization's operations
and to finance the products and services adequately
5. Account to the public for the products and services of the
organization and expenditures of its funds"

There has been much additional research on effective corporate governance, governance scorecards, and the relationship of good governance to stock price. In this research, "board independence and separation of the chairman and CEO posts" are leading measurements and presumed indicators of the effectiveness of boards.
However, Beth Young, in writing this article titled, "Corporate governance and firm performance: is there a
relationship?" suggests that this presumption or intuitive common sense is inconclusive from empirical study. She reasons, however, that "The lack of a relationship between board independence and
performance across a large number of companies does not, however, mean
that increased independence is not the right prescription for any
individual company's board," and concludes, "as the academic research shows, there is no governance 'magic bullet,' and no substitute for thoughtful, contextual
analysis."

IN the context of Sprint Nextel, it is clear that, through either complacency or incompetence or both, the Sprint Nextel BOD has failed shareholders in the most of the areas defined a their "Major Duties" above.

In the relevant link above, Walt Piecyk, of Pali Research, is right on in identifying and demanding the ouster of several board members to "improve
strategic decision making." In this context, given the specific names of the board members that he has targeted, I support Walt and say, "let the sackings begin."

HQ in KS, And The Corn Fields Let Out A Sigh

In other news, the long awaited consolidation of HQ to Overland Park has been announced. One day later (today), late in the trading day as I write this, the stock is down over 3%, giving back most of the gains from the previous day that was in reaction to the appointment of Whitworth to the board. What gives? I was thinking about the "who would buy iDEN?" question this morning in the context of the recent departure of the Nextel-legacy execs, Saleh, Angelino and Kelly, and thinking, if iDEN were to be spun-off at all, this trio of execs might have been interested in setting sail in that wooden ship onto the wireless high seas, and thus have hung on. One logical interpretation is that they left because they were told that relocation to Kansas was inevitable and they didn't want to commit to the move. On another level though, their departure might also signal a direction contrary to what I've been predicting, which is that iDEN will be spun-off and that the recent surge in iDEN advertising is just a "dressing up for sale" exercise. If the market believes and interprets that, in totality of all these events, iDEN is going to stay for the long term, and that the sKilled CDMA-based boys and girls in Kansas are going to be managing iDEN in a consolidated HQ, perhaps that is one reason the stock is suffering from the consolidation news.

February 09, 2008

If there was any uncertainty as to what the editorial board at RCR thinks of FCC Chairman Kevin Martin, check out the picture they chose to run in the front page article of the February 2, 2008, paper edition:

Photo Credit: UPI PHOTO/ROGER L. WOLLENBERG

Kevin Martin, Chairman of the FCC is on the left. My first impressions
were that he either looks like he giving an obscene gesture to his many
critics or has been trying to hitch a ride out of DC for awhile and is
getting tired.

Overview
New advertising and branding initiatives by Sprint Nextel of the iDEN
network may be raising more questions than they are answering on future
direction of the company.

AnalysisDisclosure: It's stated on Issue 1 of this Newsletter and
on my blog that I
am a former Sprint Nextel employee. I have absolutely no inside
information, nor have I had any discussions with insiders relating to
this analysis. These are my own hunches and opinions. I do, however,
have a modest (and rapidly diminishing level of) equity in the company
from my days as an employee.

If you have been watching Sprint Nextel's advertising and branding
activities lately, you will have noticed that since the first of the
year, consistent with the January 30, 2008, press release,
reaffirming Sprint Nextel's commitment to the iDEN network, advertising
for the iDEN network and iDEN Push-To-Talk (PTT) seems to be all Sprint
Nextel is advertising, with one exception.

For the Super Bowl, there was an iDEN PTT ad at the end of the pre-game
show. For that day, iDEN was the underdog to the Sprint Nextel CDMA
spot that aired during the game. Other than that CDMA network spot
during the first quarter, iDEN PTT advertising seems to be everwhere
there is a Sprint television ad.

What does this revitalized advertising for PTT mean? Here are some possibilities:

New management at Sprint Nextelis walking the talk in backing iDEN for the long term.

Sprint Nextel is priming the market awareness for PTT in anticipation for the introduction of Qchat PTT later this year.

Qchat has major problems and, since iDEN, albeit an iDEN with a hemorrhaging subscriber base, hence with lots of excess capacity, is the only PTT contingency plan for a defective Qchat.

What I've suggested previously: that the whole iDEN
revitalization initiative is a ploy to add value to the network in
preparation for a spin-off. A reasonable person might rightfully ask,
"Who would buy iDEN?" I'll noodle on this question and try to provide
some thoughts in the future.

While on the subject of branding, as you prepare for the upcoming
NASCAR racing season, you will also notice that the Nextel Cup has been
officially replaced by Sprint in the Cup Series logo.

To be blunt, this is a bonehead move in light of the respective Nextel
and Sprint demographics and the new, revitalized, reemphasized iDEN
network.

Conclusion
For Sprint Nextel Watchers, the recent moves on branding and the
re-emphasis of the iDEN network may be raising more questions than they
are answering on the future direction of the company.

I attended this breakfast roundtable on Thursday morning, February 7,
2008, after pulling an all-nighter writing requirements for a potential
vendor to provide us with a rough order magnitude estimate to develop a
demo for our investor pitch. The eggs were so-so, the bacon was ok,
and the coffee was very good. The event was well attended. If my
table was an indication of the audience makeup, there were both
wireless newbies and industry veterans in attendance. The panel was
very good. Thankfully, no one made reference to their young children
in responding to any questions, although Prag Shah rightfully referred
to the younger set in general in reference to their Facebook habits
when talking about usage patterns and demand.

In response to a question to the panel on what the most and least hyped
trends are in mobile, one panelist, Kevin Bertram, named mobile video
as most hyped. I silently agreed with the assessment, thinking, "Easy
answer, and obvious,. too." Then Tom Wheeler weighed in with a well
thought out, historian's
long term perspective that disagreed with what the first Mr. Bertram
said. In Mr. Wheeler's long term view, content will, over time,
inexorably (my paraphrase) move to mobile video, just certain types of
content have moved from print to television. I'm not sure I agree with
this assessment, though. When people read print or watch television,
there is a different dynamic in the relationship between the person and
the person's state of mind to the media as compared to mobile video.
Thus, "content" may not be from the traditional sources and producers.
In my view, a user of mobile video, if and when it develops, may very
well need uplink speeds as fast as downlink speeds, unlike the way
today's asymmetric broadband networks are designed. I wrote some not
widely read analysis a few months ago from which I will reprint some
excerpts:

Mobile TV is still in the early stages of market maturity. There
are interesting services out there, but a fundamental question remains
as to how much demand there will be for these services. If mobile TV
takes off, will it be of the streaming live broadcast variety, i.e.,
will I really care to catch Chris Matthews "Hardball" or the latest on
"The View" in real time, or will mobile TV consist more of a TIVO or
DVR / on demand service? Other than for unique, live events, such as a
sporting event or an unfolding event of national importance (perhaps if
mobile TV existed more than ten years ago, OJ could have watched
himself being pursued in real time in his infamous white Bronco slow
speed chase), demand for such a service and the burden on
infrastructure might at best be localized. Temporary capacity could be
deployed at sporting events where mobile TV demand might be greatest,
e.g., in the audience or stadium parking lot, as is done today, or
around major cities, if their team happens to make it to the World
Series. (Satellite might be an intriguing solution for this scenario
if claims of dynamically allocating capacity over wide geographic
areas, as MSV claims, are proven.)

At any rate, though, it's hard to argue that today we are reaching a
choke point, since the mobile TV market is still in its infancy.

There are technology alternatives to consider. One direction that ICO
seems to be following is the idea of satellite video to the handset.
4G technologies may also provide adequate bandwidth. In all cases,
though, some form of improvement in compression technology is desirable
and needed, as all carriers seek to minimize Capex and Opex.

Now for the fun part. Where will the burden on infrastructure due to
video likely to come from? Users. It will come from social
networkers. If there is a way for social networkers to update their
sites not just with droll commentary about how they are feeling at
10:11 am on Tuesday or uploading the pic they took at the soccer game
but to also broadcast that blind date in real time to all your closest
Facebook friends, wow that would be so [insert pithy text message in
this space]. This scenario may sound weird to someone from my
generation, who may have thought that John Glenn was the embodiment of
cool -- but this is the direction in which the kids and technology are
heading. Going out on a limb here, but I will claim that peer-to-peer
broadcasting or YouTube-like uploading and downloading to blogs is most
likely where the demand will come from.

Rather than "delivering" TV to the phone, future wireless traffic may
also require a substantial uplink component. As others have commented,
rightly, in the future, uplink speeds need to be improved as we move
towards a world where there's more user generated info being uploaded
to the net than is downloaded.

February 01, 2008

OverviewBig announcements on the Sprint Nextel front this week.
Sprint, Clearwire tying up again and the curious announcement on the
iDEN network. Included in the developments was the announcement of a
$31B impairment charge, which will not be covered below.

AnalysisDisclosure: It's stated on Issue 1 of this Newsletter and on my blog
that I am a former Sprint Nextel employee. I have absolutely no inside
information, nor have I had any discussions with insiders relating to
this analysis. These are my own hunches and opinions. I do, however,
have a modest (and rapidly diminishing level of) equity in the company
from my days as an employee.

That said, there were a couple interesting
announcements relating to Sprint Nextel in the past day or so. One of
which was the announcement that the Sprint - Clearwire cooperation
arrangement is back on. Not much to comment on here. The ongoing
dosey doe with Clearwire has probably been for different motivations
every dosey. The initial arrangement might have been made from the
Sprint point of view in order to shift risk and costs onto others.
However, Barry West had stated publicly weeks before the initial dosey
that Sprint had the resources to build the WiMAX network on its own.
Perhaps the desire for more ubiquitous coverage may have been a
secondary motivation at first, but then made strategic sense when
financial music stopped. The breakup a few months ago was curious
again. I would have thought that Sprint would have stayed the course
on WiMAX relationships until a new CEO came on board and had a chance
to assess the situation. At any rate, the Street has never approved of
Sprint Nextel's recent go it alone approach. Consistent with my
article in Issue 1 on the Sprint Magical Mystery Tour, I see this tie-up with Clearwire as a first step in a multi-phased spin-off of WiMAX.

More interesting is the Sprint affirmation of the iDEN network. Let's break down the politburo press release.

Starting off by calling the service itself
"Nextel Direct Connect" is a change from previous brand positioning,
where Sprint Nextel in the not to distant past decided to brand Direct
Connect as a service, like voice mail, independent of underlying
network technology, in preparation for the rollout of Qchat. The
re-emphasis and change back to "Nextel" branded Direct Connect means
something, but we may have to wait for the next photo of the committee
to see who's missing before we can draw conclusions.

Next up, the announcement of new, recently
introduced iDEN handsets. You will notice in recent media advertising
that introduction of iDEN handsets with the "i" in the model
designation rather than "ic". A single "i" means that the phone is a
single mode, iDEN-only handset. For awhile, you only saw cheap, lower
cost "i" handsets. Most other models for iDEN were "ic". An "ic"
handset is a dual mode iDEN / CDMA phone. Sprint currently calls them "hybrid"
phones. A re-emphasis on iDEN-only handsets going forward could, on
the one hand, indicate the longer life of iDEN, but the big question
here remains: under whose ownership.

Then there is this sentence: "Sprint will also focus on enhancing Nextel Direct Connect in 2008, including aggressively marketing Nextel Direct Connect and expanding features and functionality including combining Direct Connect with Sprint Mobile Broadband data capabilities." [Emphasis added.] There
has been a brain drain of technical expertise on the Motorola
development side for many years now. The group is a shell of what it
once was. On the Sprint Nextel side, most of the technical talent that
was there in the hey-day of iDEN, has either left the company or taken
refuge in Xohm, the WiMAX unit. Few are left to write technical
requirements or oversee proprietary iDEN development for end-user
features. What is intriguing is the next part of the phrase though
about combining Direct Connect with broadband. Are we talking about a
new dual mode, I mean, hybrid phone, or, perhaps, foreshadowing of a
future iDEN / WiMAX device? I'm not a professional analyst, but if I
were, I might be interested in this question on a future earnings
call. Also, if there is an iDEN / WiMAX device in the offing, you
might be able to continue to support the theory of a potential iDEN /
WiMAX bundled spin. Of course, at best, the politburo might know, but
sometimes, they have no clue either.

What follows is a review of the value add of Direct Connect,
followed by several customer testimonials. Sounds like a nice network
that some people, perhaps an Arab sheik, might find valuable.

Conclusion
If indeed, Sprint Nextel intends to keep iDEN around for the long term,
this would be diametrically opposite to what has been the inexorable
momentum since the merger closed. Repeating what was said on the Sprint Nextel Magical Mystery Tour,
it's hard to imagine iDEN continuing as a viable network managed from
Kansas. Given that there are strong signals that headquarters will be
consolidated in Overland Park, KS., my opinion is that a fresh coat of paint is being brushed on iDEN in preparation for a sale.

January 31, 2008

OverviewBeware of
declarations of what the next killer app is going to be,
because those who so say, no matter their stature, many times have little understanding of what
the implementation issues are.

AnalysisAt a TelecomHUB event this past week on the topic of "Hot Topics
in Telecom in 2008," a panelist, in answer to a question on how important
content will be, kept referring to the usage patterns of his college kid
as an indicator of what future needs will be. Now, I understand that the young many times embrace new technology and are the best early adopters. However, in answer to a number of
similar questions, the panelist kept referring to his son so many times that I felt
people in the room were tempted to cut right to the chase and start asking him
directly his kid's opinion on important issues rather than the high paid
technology executive father who was on the panel.

In the February 4,
2008, BusinessWeek article, "Facetime" by Maria Bartiromo, the famous
CNBC anchor interviewed a number of attendees that attended the conference
this year in Davos. In her last Q and A with Glenn Hutchins, of Silver
Lake, was the following exchange: "[Bartiromo] What's the next
Google? [Hutchins] It's wireless content. I have my Bloomberg on my
BlackBerry. It's fantastic. And that's what people will want.
Capability and content will be very significant. Wireless and mobility
have a chance to be bigger than the PC." Is that really the way to
divine the future? By looking at the
BlackBerry product roadmap?

From a broader perspective, is it valid to use personal experience and
anecdotal evidence to forecast what the wireless future will portend or is it
better to use observations of the broader
human experience, as Tom Wheeler, former President and CEO of CTIA and now with Core
Capital Partners, did in opening remarks at a annual wireless trade show several years ago in pointing
out that, in Europe, SMS had so changed the habits of young people there that,
when they rang doorbells, they used their thumbs instead of their index
fingers, thumbs having become the primary data input method.

Back to the original question and the two attempts to answer this past week in different venues: is wireless content really the future?

I might add my own counterbalancing questions: Why not mobile social
networking? How about location based services for that matter?

If mobile content is to be the next wireless great white app, the following are some questions that might need to be addressed for successful implementation:
1) Where will the content come from?
2) What will the appropriate format be for the small screen?
3) How will the plethora of device operating systems be dealt with?
4) What will be the appropriate content for
what users will find valuable? (Frank on his farm in Kansas may not be as
interested in pulling up Bloomberg on his BlackBerry. The same might be
said for [politically correct, non-stereotype name] in the inner city.)
5) What would the network topology look like?
6) Which vendors are likely to be the winners?
7) What would be the impact on network capacity of certain types of content if wireless broadband were suddenly adopted by the
masses?
8) What would be the usage patterns and traffic model?
9) How might content be tailored to specific segments, i.e., narrow subject vs.
broad appeal?
10) How might the resulting network that supports mobile content be leveraged
for the public good, i.e., could public safety somehow piggy back on a content
app?

I asked Doug Hyslop, a former colleague and current partner of Wireless Strategy, LLC, a consulting house specializing in business and
technology consulting to wireless operators and vendors, for his take. Doug believes that "wireless broadband is finally reaching the minimum
performance level at which full multimedia content will take off.
Wireless has traditionally lagged behind wireline. The Internet explosion
of YouTube, Facebook, and other social and multimedia web sites was fueled by
the prevalence of cable and fiber broadband connections. In the past five
years, wireless has provided modest data services for e-mail and other
non-real-time applications, restrained by the lack of capacity and all-packet
design needed to assure low latency and consistent application
performance. As US operators deploy 4G technologies, such as Sprint
Nextel’s WiMAX effort and Verizon’s LTE plans, the capacity and
all-packet capabilities will be delivered to unleash the full power of the
Internet in the mobile environment. Video streaming and conferencing,
location tracking and monitoring, and social networking are just some of the
many possibilities that wireless broadband will enable. Envision
real-time news reports coming in from amateur videographers witnessing a
natural disaster, or a businesswoman on travel watching her son’s baseball
game in real-time. Search and rescue personnel may be networked together
and monitored for a quicker response to changing conditions."

Doug continues: "One key aspect to this wireless broadband
vision is an open access network, allowing the marketplace to deliver a wide
range of devices and user interfaces that meet certain minimum industry
performance specifications. In this environment, development companies
would have ready access to delivering new content and capabilities over
wireless. What is the future of wireless broadband?
Everything. The full power and flexibility of the Internet available
anytime, anywhere."

So, perhaps we are turning the corner on wireless network capabilities needed to support mobile content, but, obviously, one should beware of so-called experts extending anecdotal evidence to "what people will want" when there are so many implementation uncertainties. I'll have further analysis on this subject as it relates to mobile TV in a future post.

January 29, 2008

Overview
A possible scenario is submitted on how Sprint will resolve its short
term strategic issues and how this will all play out over the longer
term in the wireless industry. In the end, the author suggests a
slimmed down Sprint, after spinning off WiMAX and iDEN, is ultimately
taken over.

Analysis
Welcome to the Sprint Magical Mystery Tour! That’s an invitation! No
need for a reservation! We’ve got everything you need! Satisfaction
guaranteed! Step right this way! Come on!

What will and should Sprint do to right the ship? What should and will
Hesse do? And after that, what will happen?

What we know today is that there have been announced layoffs of
thousands in addition to thousands last year. If you are Sprint
legacy, this is all part of the routine annual layoff season. Except
this year, the situation obviously is more dire with the stock trading
at or below book value.

Strategic decisions need to be made by the new CEO. All others have
failed before him or been driven off to the desert. Sprint bled 377k
negative postpaid net adds in 3Q07. Thestreet.com reported last week
that there
will be an additional 500k negative postpaid net adds reported for 4Q07
[the official number is minus 683k]. This
is an amazing number, because it probably reflects especially weak
performance on the iDEN network. In past quarters, Boost has done
well, albeit with a high churn rate reflective of the prepaid business
model, and the CDMA network has shown strength in positive net adds,
only to be offset by iDEN losses. Assuming the strength of the CDMA
network has continued, then iDEN must be doing particularly badly to
more
than offset any positive story with the rest of the business. The
weakness of iDEN is even more astounding given that the quality of the
network is better than it has ever been (whether that is due to
increased investment or less stress on the network due to customers
leaving for Verizon is not relevant).

What are the clues that we can garner from Dan Hesse’s background and
his statements for what will happen next? Hesse has stated that his
aim is to simplify. He has done so in the past with success at
AT&T Wireless with the pioneering and industry changing Digital One
Rate plan. Unfortunately, iDEN has turned into an abscess. It needs
to be cut out and spun off. As we can see out the window of the Sprint
Magical Mystery Tour, iDEN will be spun in order for Sprint to be able
to focus on the profitable core CDMA network. Hesse has cover for this
action, because he is not associated with the previous dismal
management. Rightly or wrongly, he also has pressure from the Street to
spin WiMAX in order to preserve cashflow. All this makes sense in the
context of another somewhat obvious site on our Magical Tour: that
consolidation of headquarters to Kansas will likely happen, based on
the deduction that consolidation was one of the driving forces for
selecting him as CEO. A leading person on the board selection
committee that picked Hesse is rumored to have done so because of a
desire to save the Overland Park campus.

So far on the Tour, we have iDEN and WiMAX spun off, possibly to the
same entity and headquarters consolidated to Kansas. Sprint, if smart,
will then ensure in the spinoff terms interoperability between iDEN
push to talk and Qchat, as well as access to WiMAX. Sprint might also
want to hang on to the 5 MHz of spectrum at 1.9 GHz acquired as part
of the iDEN rebanding agreement with the FCC and in turn bear the
remaining rebanding costs of new equipment needed to move Public Safety
entities to the reconfigured spectrum. These actions might be a fair
trade as part of unloading the iDEN albatross.

Next on our Mystery Tour, Sprint will wait until after the 700 MHz
auctions are over before announcing their intentions on 4G, i.e., UMB
or LTE. More on how this fits into the big picture later.

At this point, without iDEN and WiMAX, Sprint will have become much
smaller, but hopefully profitable, and most importantly to the Sprint
mentality, costs will be controlled. At Sprint, cost containment is
more important than strategic execution, customer care, network quality
and having a clear marketing and brand message. For Hesse, there
should be an urgent need to clear out several layers of dysfunctional
management thinking, but, since headquarters will be consolidated to
Kansas, Hesse will have a protracted internal battle that will take
many years
to weed out the old line local and long distance mindset or will
ultimately fail in trying to transform management. This failure will
not be due to lack of effort, but will be due to extraordinarily
entrenched management that he needs in order to execute any semblance
of a turnaround. If there were a RoundUp
management chemical, that
kills both grass and weeds, that might get the job done quicker. Hesse
has been successful for turning around Embarq, but I would argue that
the Sprint mess is greater and will take at least two years of
organization change to fix.

Now, what happens to this spun-off iDEN dog of a network? Well, it
could thrive once it comes out from the dark cloud that was the muddled
and destructive stewardship of the Nextel PTT brand and cost
containment mindset. An analogy comes to mind here, that of a baseball
player that is not able to perform well under the pressure and
spotlight of New York City, but then thrives once traded to another
team. iDEN might also thrive under different management. Will iDEN be
sold to the Feds as part of a Public Safety network? Hard to say, but
to comply with Public Safety requirements would require substantial
development and is beyond the scope of this Tour. Please sign up for
the 4 pm Tour next week to find out what happens next.

IF and this is a big IF, hence the capital letters, Verizon does not
win the C block in the 700 MHz auction, they will be in search of
spectrum by other means and to achieve scale. In this scenario, our
Tour sees Sprint declaring LTE as a next gen technology after the 700
MHz auctions are over, thus signaling to Verizon Sprint’s desire to be
taken out of their mystery, I mean, misery through a takeover. To
those who might say, “no way, the FCC and Justice Department would
never allow such a merger, especially under a Democratic
administration,” our Tour guides are instructed to point out that there
may be additional and potentially formidable competition in the market
introduced or strengthened by whomever wins the C or D block. Thus, if
Verizon loses, they might be able pass muster with a smaller, more
compatible Sprint CDMA only network. Besides, Hillary is not as
liberal as y’all think she is.

I hope you have enjoyed this Tour. You may keep the 3D glasses that
were handed out while you were waiting in line for future tours.